METROPOLITAN TUCSON ENERGY ASSESSMENT

This summary was prepared December 1994 from the report:
Community Energy Assessment for the Tucson-Pima Metropolitan Area,
by Dr. Helmut J. Frank.

INTRODUCTION

Energy for Tucson is the lifeblood which makes modern, late 20th
century living in a desert city possible. It allows its people
to live in comfortable homes and work in climatized offices and
factories, cooled in summer and heated in winter. It lights buildings,
keeps food fresh, washes and dries laundry and dishes automatically,
runs entertainment centers, and drives dozens of small appliances.
It fuels the car, truck, train and airplane engines that provide
the mobility to move persons and freight, within and outside the
metropolitan region. Modern life without ample supplies of energy
that is convenient and economical to use is simply unimaginable.

Unfortunately, energy for Tucson does not come without problems.
These stem from the almost exclusive reliance on hydrocarbons-natural
gas and petroleum products and on coal- based electricity-which
account for the great bulk of the area's energy supplies. Petroleum
and coal, in particular, contribute to air pollution in the form
of particulates (fine dust particles), ozone (which can cause
breathing problems), nitrous and sulfur oxides (acid rain), and
carbon dioxide (threatening global warming). However, most of
Tucson Electric Power Company's coal-fired generating stations
are located several hundred miles distant from the city, minimizing
the direct impact on local air quality.

Arizona is a state that is poor in conventional energy sources.
Thus Tucson has to obtain virtually all its supplies of petroleum
products and natural gas, and also most of the fuel for operating
its power plants, from out-of-state. This results in very large
dollar expenditures for energy supplies shipped in from other
states. It also entails vulnerability to supply interruptions
since oil and gas have to be shipped over long distances via pipelines,
which could potentially be cut from both natural causes (like
earthquakes) and man-made actions (like sabotage).

Predictions that the world would run out of oil and gas in a short
time have not been borne out: proved world oil reserves have risen
some 50 percent in the past 20 years to a 95-year supply while
gas reserves have more than doubled. After two sharp increases
in the 1970s, oil prices collapsed in the mid-1980s and are now
far lower in actual dollars, let alone after adjustment for inflation,
than at the peak of the second crisis, in 1980. So are natural
gas prices; and inflation adjusted U.S. pump prices of gasoline
are lower than before the first energy crisis (1973). Nevertheless,
oil and gas are depletable raw materials and are bound to become
scarcer and more expensive at some point, however far away in
time.

Moreover, U.S. domestic reserves and production have fallen steadily
in the past ten years as low prices and restrictions on drilling
drove investment overseas. Exploration has spread throughout the
globe some two-thirds of proved reserves are located in the ever
volatile Middle East. Although U.S. oil demand fell in the early
1980s and has risen only slowly since then, dependence on imported
sources begun to rise again and is now nearly half of total demand.

ENERGY DEMAND

Net energy consumption in the Tucson area (which excludes net
exports and electricity generating and transmission losses) totaled
126.9 trillion Btu in 1992. The largest energy consuming sector
is transportation which accounts for over half the total. Next
come industrial uses, followed by residential and commercial uses.

Petroleum is by far the largest energy source used by Tucsonans,
with 56 percent of the total. The transportation fuels constitute
the bulk of this. Natural gas, at 23 percent, is the second largest
source, followed by electricity, at 18 percent.

Tucson's energy consumption per capita, at 181 million Btu in
1992, was 26 percent lower than that for the state as a whole,
due to such factors as somewhat lower temperatures than the Phoenix
area; lower humidity which permits greater use of evaporative
coolers; lesser concentration of industrial plants; and shorter
average driving distances for commuters. Not surprisingly for
a desert city, the largest single use of electricity is cooling
of all types, with operating refrigerators second. Electric space
heating in Tucson is a comparatively small portion of the total
load since the most buildings are heated with natural gas. This
also applies to water heating. A large part of total usage consists
of the many items-from washer and dryers to radios, TV sets and
VCRs-which are not heavy users individually but add to a large
share of total consumption (36 percent). Perhaps unexpectedly,
lighting uses only 1-2 percent of the total.

Net consumption of major energy sources in Tucson increased by
21 percent during 1980-92, or an average of 1.6 percent per year.
The fastest growth occurred in petroleum (4.1 percent per year).
Electricity increases also were large (3 percent a year). Natural
gas sales by Southwest Gas declined significantly but total usage
did not as large customers began to purchase gas directly from
producers, under revised federal regulations. Tucson's total
energy use grew less rapidly during the 12-year period than its
population (32 percent) so that per capita energy use fell by
9 percent. Increased automobile efficiency alone accounts for
much of this improvement; however, this has been more than offset
by the growth in the number of vehicles plus increased miles driven
per vehicle. The major reason has been increased energy efficiency,
spread over all major user groups.

Energy expenditures by Tucsonans totaled some $1.2 billion in
1991. Residential users accounted for over one-fourth of this;
adding purchases of motor gasoline brings residential energy
spending to over half of the total ($642 million), equivalent
to some $2,343 per household or 6 percent of average family income.
The largest expenditure by energy type was for petroleum fuels
(46 percent), with electricity close behind (42 percent) and natural
gas much smaller (11 percent). Some 70 percent of the money spent
on energy is estimated to leave the metropolitan area, and is
thus not available for paying for local labor, materials or investment.
The real issue is, however, whether a Btu can be obtained more
cheaply and cleanly from local or outside sources, or whether
it can be saved by practicing energy conservation at lower cost
than it can be made or purchased.

ENERGY SUPPLIES

Natural Gas

Natural gas supplies for the Tucson market are transported to
the city by El Paso Natural Gas Company (EPG) from various fields
in the southwestern United States. The system also supplies southern
California and its carrying capacity far exceeds the needs of
the Tucson market. Tucson's local gas distribution company, Southwest
Gas (SWG), sells the bulk of the gas consumed in the Tucson area.
However, recent changes in federal regulation require gas pipeline
and distribution companies to provide open access to third parties,
and several large Tucson industrial users are purchasing supplies
directly from competing sources and having EPG and SWG transport
it for them. This change, plus deregulation of field prices, establishment of a gas futures market and increased competition from electricity, have dramatically altered the nature of the formerly heavily regulated industry. Natural gas prices, which had already been held down by the surplus of crude oil worldwide, have fallen sharply, and this in turn has contributed to a long-term decline in domestic
drilling and reserves. Unlike oil, domestic gas supplies cannot
be readily augmented by supplies from overseas, even though world
reserves are very large. But they are increasingly supplemented
by shipments from Canada, whose reserves are large and growing.

Petroleum

The Tucson area receives some 80 percent of its petroleum products
via a pipeline system owned and operated by Santa Fe Pacific Pipeline
Partners. It consists of an East Line originating in El Paso and
ending in Phoenix, and a West Line running from Los Angeles to
Phoenix and Tucson. Of the total 10.4 million barrels transported
to Tucson in 1992, some 83 percent were shipped through the East
Line. The East Line's capacity was recently expanded and is well
in excess of actual shipments. Supplies originate with refineries
in El Paso, Odessa, Texas and Artesia, NM. The West Line obtains
supplies from a number of terminals and refineries in the Los
Angeles area, including four of the five major companies operating in the Tucson market.

The U. S. Department of Energy (DOE) projects domestic crude oil
reserves and production to fall over the next 16 years. With
demand continuing to grow, though fairly slowly, further large
increases in imports seem inevitable. The precise numbers will
depend on such factors as the growth rate of the American economy,
technological improvements in finding and recovery techniques,
government policies and, critically, the trend of world oil prices.
According to the DOE model, the price in 2010 could range between
$20 and $34 a barrel (in 1992 dollars), and import dependence
could rise to between 55 percent and 68 percent from less than
50 percent currently. There have been no major interruptions
in the flow of Middle East oil during the past 15 years, but the
danger of turmoil in the ever volatile region certainly cannot
be discounted, and with it the possibility of a repeat of the
energy crises of the 1970s.

Electricity

The Tucson area's major supplier of electricity is Tucson Electric
Power (TEP). The company owns a large coal-fired generating station
at Springerville, AZ, shares of three others in the Four Corners
region, and several steam plants and gas turbines in the Tucson
area. At the peak demand day this past summer, its generating
capacity exceeded local demand by 26 percent, though much of the
surplus is sold short-term to wholesale customers. TEP participates
in interchange agreements and other arrangements giving it access
to some 63 utilities in the California and elsewhere in the West.
It is a member of WSCC, a group of utilities that works cooperatively
to assure the reliability of the region's power systems, and of
the Western Systems Power Pool, a group experimenting with ways
of achieving greater generating and transmission efficiencies.

The company has recently emerged from a period of heavy financial
writeoffs and restructuring to regain marginal profitability.
Its future is still considered subject to many uncertainties
and its ability to raise capital, therefore, is limited. These prospects are reinforced by several major changes the electric industry generally is undergoing. These include increased competition in wholesale markets due to low prices of competing energy sources (in TEP's case natural gas), greater availability of power from independent producers, and continuing large excess generating capacity in the region (e.g., at the Palo Verde nuclear plant). Several of TEP's large industrial customers recently were given rate concessions to discourage them from installing cogeneration plants. Most important, perhaps, was the enactment of the Energy Policy Act of 1992, which will enable competing electricity producers to access TEP customers directly, by requiring utilities to transmit third party power over their transmission lines, thus greatly increasing competition in the market for power.

Renewables

Few places on this planet can match Pima County when it comes
to generosity of sunshine, the chief renewable energy source within
the 20-year planning period. Solar energy comes in various forms-passive (placing buildings to take advantage of the sun, planting trees, using appropriate building materials etc), active systems for
water and space heating and cooling, and photovoltaics (PV) which
convert solar rays directly into electricity. Solar systems can
also be used to produce electricity, either dispersed on individual
buildings or concentrated at central power stations.

During the early 1980's, many Arizonans installed solar hot water
heaters but the boom ended with the expiration of generous federal
and state tax credits. Since then, great technical progress has
been made, leaving the solar industry smaller but healthier. Costs
for residential water systems now are competitive with electric
water heating, and costs of central solar power stations are within
the range of nuclear power plants, though not yet with fossil
fuel units. Assuming oil and gas prices rise in coming years,
solar energy is expected to become economical in a wide range
of applications some time after the year 2000. For its potential
to be fully realized, however, solar energy will need overcome
a number of existing barriers, including lack of information and
restrictive building codes and association rules.

IMPLICATIONS AND OPPORTUNITIES

Since the energy crises of the 1970's Tucsonans have modified
their energy spending in the wake of higher prices and environmental
awareness. Energy use per capita has fallen and total energy
consumption has risen at a much reduced rate. New automobiles,
appliances and buildings all are significantly more energy efficient
than those produced earlier. With the exception of electric rates,
however, energy prices have fallen again since the mid-1980s and
may not rise much for a number of years. Current policies are
inadequate to reverse past trends in a growing community like
Tucson, in the absence of stronger economic pressures. Thus one
must expect the growth of energy consumption and the heavy reliance
on fossil fuels to continue for some years to come. But continuing
along the present path carries several serious risks. Increased
burning of fossil fuels would worsen air pollution problems and
contribute to global warming, and roadways would become ever more
congested: Tucson would follow the path of Los Angeles and Phoenix.
New power plants would have to be built eventually, when current
surplus capacity is absorbed. Prices of fossil fuels are bound
to turn up at some point, perhaps sharply. Energy expenditures
thus would continue to rise, with much of the money flowing to
out-of-state suppliers. Growing dependence on imported oil would
leave consumers vulnerable to supply interruptions.

Beyond these dangers, continuation along the present path would
mean that Tucson would miss a unique opportunity: the chance to
be a leader in the transition to a new age, the age of clean,
renewable energy sources. Tucson can wait until these sources,
and the technologies for applying them, are more fully developed
by others, and then adapt them to suit its local conditions.
Or it can "get to the future first," by becoming a national,
and even world, leader in conservation and application of renewable
energy sources. It can demonstrate how forward thinking, planning,
and use of state of the art technologies can point to a better
way of living in a fragile desert environment, to a more sustainable
future.

There is much to be gained from choosing this second course-not
only a cleaner, healthier environment but also a healthier, stronger
economy-attracting new well paid jobs, many more visitors, and
substantial investment capital. Tucson can and should seize a
unique opportunity that now presents itself, an opportunity to
become an exciting, forward looking community moving full speed
into the 21st century.